Prospa, a leading Australian online lender to small business, is pleased to announce its pro-forma results for H1 FY19. The total loan originations for H1 Financial Year 2019 were $225 million, up 10 percent on the forecast of $204 million and up 44% on a pcp basis.
Total loan originations for calender year 2018 were $436 million, up 13 percent on the forecast of $386 million and up 51 percent on a pcp basis.
Customer satisfaction has also remained consistently high, with Prospa’s average Net Promoter Score in excess of +77 in 2018. Prospa also has a rating of 9.8/10 on independent review platform TrustPilot.
What does this growth look like in Prospa’s Aussie and New Zealand markets?
Prospa’s total loan originations have now surpassed $1 billion comprising A$1 billion in Australia and NZ$10 million in New Zealand, delivered to over 19,000 small businesses as demand continues to grow.
Revenue is ahead of forecast with H1 FY19 revenue $67.7 million, up 8 percent on forecast and up 41 percent on pcp. This performance was driven by strong loan originations.
Pro forma EBITDA for H1 FY19 was $6.1 million up 17 percent on forecast and up 41 percent on pcp, as the company continues to actively seek lower funding costs and make increased investment in core and new product opportunities.
Ed Bigazzi, CFO, said, “It’s been a healthy start to the 2019 financial year for originations, revenue and EBITDA and we’ve laid strong foundations for our growth plans.
“Our loss performance remains within the Board-mandated range and our 90+ days past due (DPD)remains stable.”
Greg Moshal, co-founder and joint CEO of Prospa, said, “The increasing demand for our product shows we deliver a much-needed service that is highly valued by our customers.
“Small businesses are the engine room of our economy. We’re incredibly proud of the work our team does every day to keep small businesses moving with the right finance solution for their needs.”
Beau Bertoli, co-founder and joint CEO of Prospa, said, “We have successfully completed a pilot program in the New Zealand market, delivering loan originations of approximately NZ$10 million in the first 6 months and we’re looking forward to continuing this trajectory as we scale up our operations.”
How is the fintech lender driving down its funding costs?
In the past three months, Prospa has further optimised its funding structures and re-financed A$45 million in junior notes to new fixed income investors, materially lowering its fully drawn cost of funds.
In keeping with its long-term strategy, Prospa will continue to pass savings onto its customers, with the weighted annual percentage rate (APR) of the portfolio now at 36 percent.
Our lower funding costs allow Prospa to access greater segments of the small business lending market. Prospa’s interest rates range between 8.5 percent and 29.9 percent based on credit quality.
In October 2018, Prospa raised additional growth capital through a $43 million convertible notes issue which was well supported by existing and new investors, including AustralianSuper.
This capital will fund growth in the core product, in addition to further expansion into the New Zealand market and new product and services development.
“In October, Prospa raised $43 million in funding, enabling further investment in developing our cash flow products and services; and funding increasing momentum in our loan book,” intimated Bertoli. “We’re delighted by the support we received from both new and long-term investors.”
He further added, “Prospa continues to assess the funding requirements for the business as we grow and execute our strategy.”
What is Prospa planning for small businesses?
Small businesses are a major contributor to the economy, with 2.3 million small businesses in Australia employing 44 per cent of Australia’s private sector workforce and generating 35 per cent of Australia’s GDP.
These small businesses have been underserved by the traditional banking system, and are increasingly turning to online, unsecured lending to support their growth.
Prospa sees a substantial market opportunity and estimates the potential market opportunity for small business lending in Australia is in excess of $20 billion per annum.
In January 2019, Prospa, in partnership with RFi Group and the Centre for International Economics, released research into the economic impact of its lending to small business in Australia.
The analysis found Prospa’s lending had contributed $3.65 billion to Australian GDP and resulted in more than 52,500 annual full-time equivalent positions being maintained over the prior five years.
In addition, more than one in four businesses surveyed were unsure if they would still be operating without Prospa’s lending or believed they would no longer exist.
In 2018 alone, the analysis found Prospa’s lending added almost $1.7 billion to Australian GDP and resulted in over 24,000 FTE positions being maintained.
“We’ve always believed our lending has a positive economic impact and adds real value to small business owners. The independent analysis by RFi Group and The CIE clearly demonstrates the extent to which providing access to capital allows small businesses to grow and create jobs,” said Moshal.
“The results are greater than we had ever imagined and give us an immense sense of pride in the impact of Prospa on jobs and the wealth of households, local communities and the Australian economy.”
How is Prospa showing commitment to its customers?
Prospa is a founding signatory of the AFIA Code of Lending Practice (‘Code’) for online small business lenders and has been operating in compliance with the Code since 1 January 2019.
Prospa has been instrumental in developing the new Code and reaffirms its commitment to increased transparency so that small business owners can clearly assess if a loan is right for their needs, how much it is going to cost, and if it is the best solution available to them.
Bertoli said, “Feedback from our team and our customers has been positive and the increased information we provide is resonating with all stakeholders. We anticipate continued positive momentum.”
Prospa has a history of industry leadership and innovation, having funded its first loan in 2012, implemented same day loan approval capability in 2013 and implemented the first Australian small business loan securitisation in 2015.
While traditional banks have been pulling back from small business lending, Prospa has invested significantly in customer experience and customer success teams who seek to offer personalised support to small business owners.
What changes are taking place in the boardroom at Prospa?
In February 2019, Gail Pemberton AO, who was a Non-Executive Director of Prospa, assumed the role of Chairman in a succession planned 12 months ago when she first joined the Board.
Greg Ruddock stepped down from the Chairman role but continues in his capacity as a Non-Executive Director.
Ms Pemberton said, “Prospa is a business with great energy and vision and a determination to advance the cause of its customers. I believe it has an important role to play in funding the future growth of Australian small businesses and I am delighted to have the opportunity to serve as Chairman.”
Prospa has also appointed Emma Robinson as Chief Marketing Officer and Elise Ward as General Manager, People &Culture. Prior to joining Prospa, Emma was Head of Marketing for ANZ’s Business & Private Banking.
She will have a specific focus on digital acquisition, brand building, customer engagement and retention, and designing new product innovations.
On the other hand, Elise’s position focuses on attracting world class talent and developing an exceptional employee experience. Elise previously held senior roles at Samsung, Tabcorp and ElasticPath Software.
What next for this fintech lender?
Prospa provides cash flow products and services that allow small businesses to prosper. Co-founder and joint CEO Bertoli sees the company maintain its growth well into the year.
“We also intend to launch our line of credit in Australia in the second half as a convenient and flexible source of funds that puts small business owners in charge of their finances,” he said.
“We will also continue to build a better business loan that provides fixed-term finance for small businesses.”